Go Daddy launches budget domain biz

Bob Parsons, president of domain name industry success story Go Daddy Software Inc, has launched a sister company aimed at extending the same deep-discounted domain services to a wider channel,

Kevin Murphy writes

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Wild West Domains Inc, the new venture, said this week that it has recruited 1,600 resellers in the first month of operation. But, in reality, about 1,000 of these are former Go Daddy resellers that were obliged to switch when Go Daddy closed its channel.

Wild West is targeting a market already served by Tucows Inc, Bulk Register Inc and VeriSign Inc - allowing web hosts and other small online businesses to sell domain names, where the wholesale cost is just slightly marked up from, say, the $6 the VeriSign .com registry charges for a year's registration.

The new company charges a wholesale price of $6.75 for one year's registration of a .com name, plus 25% of whatever markup the reseller applies. This contrasts to the $10 Tucows charges and the $6 to $8 VeriSign's SRSPlus charges for the same service.

There is also a $99 set-up fee. Parsons said the pricing structure was put in place to "keep prices down". He said that some resellers are in fact large-volume speculators that want to buy even cheaper than the $9 Go Daddy charges per name per year.

Industry sources speaking on the condition of anonymity criticized the new offering, however, saying that it was little more than a web-based affiliate sales system that offers potential resellers the chance to make less money than competing offerings. Products from rival firms offer APIs that resellers use to directly interface with back-end systems.

Parsons admitted that currently Wild West currently offers its resellers web page templates and prewritten code to launch their sites, but added: "We are hard at work on an API and will deliver that within the next 90 days." An advantage of the current system, he said, is that users have zero exposure to credit risks.

Critics also said that, unlike rival offerings, Go Daddy will be competing with Wild West resellers. "The fact is that a separate subsidiary with common ownership provides no guarantee of not competing," a source said. "This promise is good only as long as GoDaddy honors it, and will not be put to the test until times get tough."

Parsons said that although Wild West and Go Daddy share their technology infrastructure to keep overheads down, they have separate ICANN accreditations, and separate management and marketing teams. "They're both trying to put each other out of business," said Parsons. "It keeps them sharp."

Despite the critics, Wild West will be a firm to watch, if purely on the basis of Go Daddy's success in the market. The firm is at least partly responsible for the growth issues facing market leading publicly held registrars including VeriSign and Register.com Inc, which tend to sell at a premium price.

Both these firms have had volume growth concerns over the last 18 months, and while much of this is due to speculative registrations elapsing (or being transferred to rivals), many customers go to budget offerings instead. Both VeriSign and Register.com say they can live with losing the speculators, who rarely buy add-on services.

Parsons said Go Daddy currently takes about 4,000 to 5,000 new domain registrations per day. According to SnapNames.com Inc, which tracks industry data, Go Daddy's registration base grew by about a third from 774,515 to 1,021,591 in the three months to June 30, giving it a 3.55% market share. The firm grossed the second-largest number of registrations in the market in the second quarter.

By contrast, the two biggest premium registrars saw dwindling market share. VeriSign's base dropped 15.6% to 9,480,463, a 33% share, and Register.com's by 1.6% to 2,853,144, a 9.9% share. Tucows, which operates a channel of several thousand resellers and sells its domains for $1 more than Go Daddy, was up about 3% at 2,962,370 at 10.3% share in the same period.

But Go Daddy is not about to join its public competitors any time soon. Parsons, who is the only shareholder in both companies but claims to draw a wage of just $5.15 an hour, said he intends to keep Go Daddy and Wild West private permanently. "People often ask what my exit strategy is," he said. "I don't have one. My exit strategy is to be cremated."